EXECUTION
OPERATING AGREEMENT
OF
CHRISTIANA CENTER OPERATING COMPANY I LLC
Dated as of September 19, 1997
TABLE OF CONTENTS
Page
ARTICLE 1
GENERAL PROVISIONS..........................................................2
1.1. Formation.............................................................2
1.2. Name and Principal Place of Business..................................2
1.3. Registered Agent......................................................2
1.4. Purpose...............................................................2
1.5. Limitation on Purposes................................................2
1.6. Title to Property.....................................................3
1.7. Term..................................................................3
1.8. Type of Income........................................................3
ARTICLE 2
CAPITAL CONTRIBUTIONS.......................................................3
2.1. Capital Contributions Generally.......................................3
2.2. Capital Contribution of Class A Member................................3
2.3. Capital Contribution of Class B Member................................4
2.4. Initial Capital and Credit to Capital Account.........................4
2.5. Additional Capital Contributions......................................5
2.6. Maintenance of Capital Accounts.......................................6
2.7. Preferred Capital.....................................................7
2.8. No Interest...........................................................7
2.9. Revaluation of Company Property.......................................7
ARTICLE 3
MANAGEMENT..................................................................7
3.1. Management............................................................7
3.2. Manner of Acting......................................................7
3.3. Contact Representatives...............................................8
3.4. Designated Representatives............................................9
3.5. Fees, Compensation and Reimbursement of Expenses......................9
ARTICLE 4
THE MEMBERS................................................................10
4.1. Meeting of Members...................................................10
4.2. Limitation of Liability..............................................10
4.3. Company Records......................................................10
4.4. Duties of Members....................................................10
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4.5. Activities of Members................................................10
4.6. Independent Activities of Members....................................10
4.7. Dealings with the Company............................................11
4.8. Covenant not to Withdraw.............................................11
4.9. Additional Members...................................................11
ARTICLE 5
REPRESENTATIONS AND WARRANTIES.............................................12
5.1. Representations and Warranties of Members............................12
ARTICLE 6
INDEMNIFICATION............................................................14
6.1. Liability............................................................14
6.2. Company Indemnification..............................................14
6.3. Member Indemnification...............................................15
6.4. Class B Member Indemnification.......................................15
ARTICLE 7
TRANSFERS..................................................................15
7.1. Transfer Restrictions................................................15
7.2. Permitted Transfers..................................................16
7.3. Conditions of Transfer...............................................16
7.4. Transfers; Recharacterization........................................16
7.5. Conversion of Class B Member.........................................17
ARTICLE 8
BUY-SELL PROVISIONS........................................................17
8.1. Mutual Disagreement..................................................17
8.2. Mandatory Buy-Sell of Interests. ....................................17
8.3. Closing of Purchase or Sale..........................................18
8.4. Definitions..........................................................18
ARTICLE 9
ALLOCATIONS OF PROFITS AND LOSSES..........................................19
9.1. Allocations of Profits...............................................19
9.2. Allocation of Losses.................................................20
9.3. Special Allocations..................................................20
9.4. Curative Allocations.................................................21
9.5. Allocations for Tax Purposes.........................................21
ARTICLE 10
DISTRIBUTIONS..............................................................22
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10.1. Net Cash From Operations............................................22
10.2. Net Cash From Sales or Refinancings.................................23
10.3. Authority to Withhold...............................................24
ARTICLE 11
BOOKS, RECORDS, REPORTS AND ACCOUNTING.....................................24
11.1. Books and Records...................................................24
11.2. Company's Accountants...............................................24
11.3. Fiscal Year. .......................................................24
11.4. Accounting Period...................................................25
11.5. Annual Reports......................................................25
11.6. Quarterly Reports...................................................25
11.7. Preparation of Tax Returns..........................................25
11.8. Tax Controversies...................................................25
11.9. Tax Elections.......................................................25
ARTICLE 12
DISSOLUTION AND LIQUIDATION................................................26
12.1. Dissolution.........................................................26
12.2. Bankruptcy of a Member..............................................26
12.3. Liquidation.........................................................26
12.4. No Liquidating Distributions in Kind................................27
12.5. Deficit Capital Account.............................................27
12.6. Certificate of Cancellation.........................................27
12.7. Non-Recourse........................................................27
ARTICLE 13
MISCELLANEOUS..............................................................28
13.1. Amendments..........................................................28
13.2. Notice..............................................................28
13.3. Governing Law.......................................................29
13.4. Severability........................................................29
13.5. Binding Effect......................................................29
13.6. Titles and Captions.................................................30
13.7. No Third Party Rights...............................................30
13.8. Time is of Essence..................................................30
13.9. Further Assurances..................................................30
13.10 Incorporation by Reference..........................................30
13.11. Legal Representation................................................30
13.12. Entire Agreement....................................................30
13.13. Counterparts........................................................30
13.14. Execution of Certificate of Formation...............................30
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DEFINITIONS OF TERMS......................................................1
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OPERATING AGREEMENT
OF
CHRISTIANA CENTER OPERATING COMPANY I LLC
THIS OPERATING AGREEMENT OF CHRISTIANA CENTER OPERATING COMPANY I
LLC (the "Agreement") is made and entered into as of the 19th day of
September, 1997 by and between Brandywine Operating Partnership, L.P., a
Delaware limited partnership (the "Class A Member") and Gender Road Joint
Venture, a Delaware general partnership (the "Class B Member" and together
with the Class A Member, the "Members") as members of CHRISTIANA CENTER
OPERATING COMPANY I LLC (the "Company").
Capitalized terms used in this Agreement shall have the meanings set
forth on Exhibit A attached hereto unless they are otherwise defined in the
preamble, the Background or the particular section in this Agreement in which
they are used.
BACKGROUND
The Class B Member is the owner of the Land. The Members desire to
organize and form the Company for the purposes of acquiring the Land from the
Class B Member, and developing, constructing and operating the Project, which
will be owned, leased and operated by the Company for the production of
income. In connection with and as a condition of the consummation of the
transactions contemplated by this Agreement, the Company shall enter into (i)
the Land Acquisition Agreement with the Class B Member pursuant to which the
Class B Member shall sell, and the Company shall purchase, the Land and (ii)
the other Collateral Agreements.
This Agreement sets forth the understanding between the Members with
respect to the terms and conditions of the Land Acquisition (to the extent
not inconsistent with the Land Acquisition Agreement), the construction,
management and operation of the Project, and the distribution of proceeds
received from the ownership and/or disposition of the Property.
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and preceding with the Background paragraphs
incorporated by reference, the Members, intending to be legally bound hereby,
covenant and agree as follows:
ARTICLE 1
GENERAL PROVISIONS
1.1. Formation. The Members desire to form the Company as a limited
liability company under the laws of the State of Delaware, and in connection
therewith desire to set forth their agreements and understandings as stated
in this Agreement. The Members agree that the Company shall be operated
pursuant to the terms and conditions set forth in this Agreement, and to the
extent not inconsistent therewith, the Act. The Members agree to execute or
cause the Company to execute all certificates and documents, including a
Certificate of Formation, required by the Act in order that the Company
qualify as a limited liability company under the Act. The Members shall do
or cause to be done all such other filings, including amendments of the
Certificate of Formation, recordings, or other acts as may be necessary or
appropriate to comply with the laws of formation and operation of a limited
liability company in the State of Delaware and any other jurisdiction in
which the Company may conduct business.
1.2. Name and Principal Place of Business. The name of the Company
shall be "CHRISTIANA CENTER OPERATING COMPANY I LLC" or such other name as
the Members from time to time may select. The principal place of business of
the Company shall be Gender Road Joint Venture c/o The Commonwealth Group, 00
Xxxx'x Xxx, Xxx Xxxxxx, Xxxxxxxx 00000, or such other place as the Members
from time to time shall determine.
1.3. Registered Agent. The registered agent for the Company shall
be The Corporation Trust Company located at Corporation Trust Center, 0000
Xxxxxx Xxxxxx Xxxxxxxxxx, XX 00000.
1.4. Purpose. The sole purpose of the Company shall be to acquire
the Land, and to construct, control, own, manage, operate and maintain the
Project in accordance with the terms of this Agreement and, to the extent
applicable, the Collateral Agreements. In connection therewith, the Company
shall have the authority to do all things necessary and appropriate to
construct, operate, manage and maintain the Project.
1.5. Limitation on Purposes. The Company shall exist solely for the
purposes specified in Section 1.4 hereof and unless the Members agree
otherwise, the Company shall not engage in any business other than the
Project. The Members do not intend and this Agreement shall not be deemed to
create any joint venture, partnership, or other arrangement by and between
the Members with respect to any business or activities of any Member other
than the business and activities specifically set forth in this Agreement.
No Member shall have the power to bind the other Member except with respect
to the business of the Company as specifically set forth in this Agreement.
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1.6. Title to Property. All property owned by the Company, whether
real or personal, tangible or intangible, shall be owned by the Company as an
entity and in the name of the Company, and no Member shall have any ownership
interest in such property. The interest of all Members in the Company are,
for all purposes, personal property.
1.7. Term. The term of the Company shall commence upon the filing
of the Certificate of Formation in accordance with the Act and shall continue
until the Company is terminated in accordance with Article 12 of this
Agreement.
1.8. Type of Income. The Class B Member hereby acknowledges and
agrees that Brandywine Realty Trust, the general partner of the Class A
Member, is a real estate investment trust as defined in Section 856 of the
Code, and that as long as the Class A Member is a member of the Company, the
Company shall manage its affairs in a manner such that the Company does not
intentionally earn any income for tax purposes or acquire any assets which
would cause Brandywine Realty Trust to violate any of the provisions of Code
Section 856.
ARTICLE 2
CAPITAL CONTRIBUTIONS
2.1. Capital Contributions Generally. The Members shall make
Capital Contributions to the Company at the Agreed Value set forth in this
Section 2.1 at such times and in such manner, and on such terms and
conditions as set forth in Section 2.2, in the case of the Class A Member,
and as set forth in Section 2.3, in the case of the Class B Member; provided,
however, that any such Capital Contributions shall not be treated as Initial
Capital or credited to such Member's Capital Account until such time as set
forth in Section 2.4 hereof. The Agreed Value of each Member's Capital
Contribution is as follows:
Member Agreed Value
------ ------------
Class A Member $2,000,000
Class B Member $1,910,000
2.2. Capital Contribution of Class A Member. The Class A Member's
Capital Contribution at the Agreed Value set forth in Section 2.1 hereof
shall be reflected in the following manner:
0.0.0.Xx connection with, and upon the closing of, the Acquisition
and Construction Loan, the Class A Member shall provide, from a suitably
creditworthy financial institution, a letter of credit in an amount up to Two
Million Dollars ($2,000,000) to the extent that such letter of credit (i) is
necessary to facilitate the Company's procurement of the
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Acquisition and Construction Loan, or (ii) will result in the Company
obtaining more favorable terms and conditions for the Acquisition and
Construction Loan. Notwithstanding the Class A Member's agreement hereunder,
the parties acknowledge and agree that the Acquisition and Construction Loan
is intended to be funded simultaneously with the closing of the Land
Acquisition, and that the Class A Member's obligation to provide a letter of
credit under this Section 2.2.1 is expressly conditioned upon the closing of
the Land Acquisition and the Acquisition and Construction Loan.
2.2.2. In addition to and not in limitation of the Class A Member's
obligation under Section 2.2.1 hereof, it is anticipated that prior to or
upon completion of the Project, the Acquisition and Construction Loan will be
refinanced with the Permanent Loan and a cash contribution by the Class A
Member in the amount of Two Million Dollars ($2,000,000) less any amounts
advanced under the Letter of Credit plus interest thereon to the extent such
amounts have not been paid or reimbursed by the Company. Accordingly, upon
the date of the funding of the Permanent Loan, the Class A Member shall
contribute to the Company cash in the amount of Two Million Dollars
($2,000,000) less any amounts advanced under the Letter of Credit plus
interest thereon to the extent such amounts have not been paid or reimbursed
by the Company; provided that upon the contribution of cash by the Class A
Member hereunder, the Letter of Credit shall be canceled. The parties hereto
intend that the cash contribution by the Class A Member hereunder, together
with the proceeds of the Permanent Loan, shall be used to satisfy the
Acquisition and Construction Loan.
2.3. Capital Contribution of Class B Member. The Class B Member's Capital
Contribution at the Agreed Value set forth in Section 2.1 hereof, shall be
made or deemed made as follows:
2.3.1. By executing this Agreement, the Class B Member agrees to
provide the Company with the right to purchase the Land and further agrees to
contribute to the Company cash in the amount of Two Hundred Sixty Thousand
Dollars ($260,000), such cash to be contributed upon the funding of the
Permanent Loan.
2.4. Initial Capital and Credit to Capital Account. Upon the funding of
the Permanent Loan, each Member's Capital Contribution shall be treated as
Initial Capital and shall be credited to such Member's Capital Account;
provided, however, that with respect to the Class A Member, to the extent
there is an advance or draw under the Letter of Credit delivered by the Class
A Member pursuant to Section 2.2.1 hereof, then the amount of such advance or
draw plus interest thereon to the extent such amounts have not been paid or
reimbursed by the Company shall be treated as part of the Class A Member
Initial Capital and shall be included in calculating the Class A Member
Preferred Return on Initial Capital to the extent thereof as of the date of
such advance or draw.
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2.5. Additional Capital Contributions.
2.5.1. It is not expected that the Members will be required to
contribute any additional capital to the Company other than those Capital
Contributions set forth in Sections 2.2 and 2.3 hereof at the times set forth
therein and at the Agreed Value. In the event, however, that either the
Class A Member or the Class B Member (the "Notifying Member"), in its
reasonable business judgment, determines that additional capital is required
by the Company, whether for capital expenditures, normal operating expenses,
debt service or otherwise in connection with the Project, then the Notifying
Member shall give ten (10) days written notice (the "Capital Notice") to the
other Member (the "Notified Member") specifying in reasonable detail the
amount and purpose of the additional required capital. If the Notified
Member agrees within said ten (10) day period that the capital set forth in
the Capital Notice is needed by the Company, such additional capital shall be
obtained through bank financing or Additional Capital Contributions, as
mutually determined by the Notified Member and the Notifying Member.
2.5.2. If the Notified Member and the Notifying Member are unable to
agree within said ten (10) day period as to whether additional funds are
needed by the Company or are unable to agree as to whether such funds should
be obtained through bank financing or Additional Capital Contributions, then
the Notifying Member and the Notified Member each shall select a
representative who together shall appoint one independent Person, unrelated
to either Member or its Affiliates and who is experienced in the real estate
development industry and has substantial expertise in the financial
marketplace (the "Advisor"), to determine whether and when additional funds
are needed and/or the manner in which such funds shall be obtained by the
Company; provided that, if the Advisor determines that such additional funds
should be obtained from the Members, then both Members shall be required to
make an Additional Capital Contribution to the Company as provided in Section
2.5.3 hereof. The Members hereby agree that, in either case, the Advisor's
determination shall be final and binding on the Members.
2.5.3. If additional funds are obtained from the Members through
Additional Capital Contributions, such contributions shall be made by the
Members, in cash on the same terms and in the same amount, within ten (10)
business days after receipt of (a) the Capital Notice (in the event that the
Members agree to make Additional Capital Contributions pursuant to Section
2.5.1 hereof) or (b) written notice from the Advisor (in the event that the
procedure under Section 2.5.2 hereof is utilized).
2.5.4. If additional funds are obtained from the Members through
Additional Capital Contributions and both Members make their Additional
Capital Contribution hereunder, then, each Member shall be entitled to the
Preferred Return on Additional Capital with respect to its Additional Capital
Contribution as of the Additional Capital Date.
2.5.5. If Additional Capital Contributions are required to be made
by the Members under this Section 2.5 and a Member (the "Defaulting Member")
fails to advance its pro rata share of such Additional Capital Contribution,
then, any amounts advanced by the other Member (the
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"Performing Member") shall be treated as a loan by the Performing Member to
the Company, and the Performing Member shall have the right, but not the
obligation, to make a loan to the Company in the amount of the Additional
Capital Contribution due from the Defaulting Member. Any amounts advanced by
the Performing Member under this Section 2.5.5, whether on its own behalf or
on behalf of the Defaulting Member shall be treated as a loan (a "Capital
Loan") notwithstanding that such funds may originally have been advanced by
the Performing Member as an Additional Capital Contribution. All Capital
Loans shall (i) be for a term of five (5) years, (ii) bear annual interest at
a rate of thirteen percent (13%), (iii) be prepayable by the Company in
whole or in part without penalty, and (iv) be repaid in full by the Company
before any distributions may be made to any Member under Sections 10.1, 10.2
or 12.3 hereof. All payments received with respect to a Capital Loan shall
be applied first against accrued and unpaid interest thereunder, and then
against the outstanding principal balance thereof.
2.6. Maintenance of Capital Accounts.
2.6.1. The Company shall maintain a separate Capital Account for
each Member in accordance with Treasury Regulations promulgated under Section
704(b) of the Code, and each Member's Capital Account shall be as follows:
(a) Each Member's Capital Account shall be credited at the
Agreed Value at the time set forth in Section 2.4 hereof.
(b) Each Member's Capital Account shall be (1) increased by
(a) the amount of money contributed by such Member to the capital of the
Company, (b) the Gross Asset Value of any property contributed by such Member
to the capital of the Company (net of liabilities secured by such contributed
property) and (c) the amount of Profits and other items of Company income or
gain allocated to such Member under this Agreement, and (2) decreased by (a)
the amount of money distributed to such Member by the Company pursuant to
this Agreement, (b) the Gross Asset Value of property distributed to such
Member by the Company (net of liabilities secured by such distributed
property) and (c) the amount of Losses and other items of Company deduction,
loss or expense allocated to such Member under this Agreement.
2.6.2. It is intended that the Capital Accounts shall be determined
and maintained throughout the full term of the Company in accordance with the
capital accounting rules set forth in Treasury Regulation Section
1.704-1(b)(2)(iv), and that all provisions in this Agreement shall be
interpreted and applied in a manner consistent therewith. In the event that
the Members determine that it is prudent to modify the manner in which the
Capital Accounts, or any credits or charges thereto, are computed or
maintained in order to comply with such Treasury Regulations, the Members,
upon agreement, shall make such modifications to the extent necessary to
comply with such Treasury Regulations.
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2.7. Preferred Capital. It is the intention of the parties hereto that
Section 2.6 shall not apply to, or in any way effect, a Member's Initial
Capital, Additional Capital, Unreturned Initial Capital or Unreturned
Additional Capital, which accounts are maintained for the purpose of
distributions pursuant to Article 10 hereof.
2.8. No Interest. No Member shall be entitled to interest on that
Member's Capital Contributions or Capital Account except as otherwise
provided in this Agreement.
2.9. Revaluation of Company Property. Upon the agreement of the Members,
the Capital Accounts of the Members may be adjusted to reflect a revaluation
of the property of the Company in accordance with, and at such times as
specified in, Treasury Regulation Section 1.704-1(b)(2)(iv)(f); provided that
any adjustments hereunder shall be made in accordance with and to the extent
provided in Treasury Regulations Section 1.704-1(b)(2)(iv)(f) and (g).
ARTICLE 3
MANAGEMENT
3.1. Management. The management of the Company shall be vested in the
Members as set forth in this Article 3. Each Member, subject to the terms,
conditions, restrictions and limitations contained herein, will possess all
of the powers and rights of a member of a limited liability company under the
Act; provided, however, no single Member shall be authorized or empowered to
undertake any action or make any decision on behalf of the Company or in
connection with the Property unless otherwise specifically set forth in this
Agreement or in a Collateral Agreement. Each Member acknowledges and agrees
that it intends to actively participate in the management of the Company and
its operations.
3.2. Manner of Acting. Where this Agreement specifically requires the
vote, consent or determination of the Members and/or in order for the Company
to undertake any Major Action (as defined in this Section 3.2), the approval
at a duly convened meeting or by written consent in lieu of a meeting of each
Member shall be required. For purposes of this Agreement, a "Major Action"
shall mean and include decisions and undertakings relating to:
(a) the acquisition of the Land by the Company pursuant to the
Land Acquisition Agreement;
(b) the construction and completion of the Project, including
construction contracts, schedules and budgets.
(c) any loans, borrowings, financing or refinancing in connection
with the Project, including without limitation, the
Acquisition and Construction Loan and the Permanent Loan;
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(d) the management of the Project, including the terms and
conditions of any management and/or leasing agreements;
(e) the annual operating budget and business plan for the
Project;
(f) the sale, conveyance, transfer, assignment or disposition
of the Land and/or the Project;
(g) leases for occupancy of space in the Project by tenants,
including without limitation rents, escalations, allowances
and other business terms;
(h) any contract or agreement giving rise to a financial
commitment or obligation of the Company;
(i) the employment of employees and/or agents in connection with
the operation and management of the Project;
(j) the admission of any additional Members;
(k) the selection of and change of accountants, auditors and/or
legal counsel for the Company; and
(l) significant tax elections required or permitted pursuant to
the Code and/or applicable law of any taxing authority to
which the Company is subject.
3.3. Contact Representatives. Each Member shall designate and appoint
one or more individuals who shall be the contact person (a "Contact
Representative") for such Member and each of whom who shall be authorized by
such Member to act on its behalf in the performance of this Agreement and who
shall be authorized to make decisions in connection with Major Actions on
behalf of such Member. The Class A Member hereby designates and appoints
Xxxxxxx X. Xxxxxxx, Xx. and Xxxxxx X. Xxxxxxx as its initial Contact
Representatives, and the Class B Member hereby designates and appoints Xxxxx
X. Xxxxxx as its initial Contact Representative. A Member appointing an
individual as a Contact Representative may, at any time, appoint and
designate a new Contact Representative, provided that such Member shall
notify the other Member of such new appointment or designation within a
reasonable time after such appointment.
3.4. Designated Representatives.
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3.4.1. The Members acknowledge and agree that while Company
decisions generally shall be made by the Members as set forth in Section 3.2
hereof, the daily operation and management of the Company shall, subject to
the limitations set forth in this Section 3.4 or a Collateral Agreement, be
delegated to the Administrative Officer, who initially shall be Xxxxx X.
Xxxxxx. In addition to the day-to-day management of the Company, the
Administrative Officer shall be responsible for the preparation of quarterly
and annual financial statements as set forth in Sections 11.5 and 11.6
hereof.
3.4.2. The Members also acknowledge and agree that certain functions
of the Company shall, subject to the limitations set forth in this Section
3.4 or a Collateral Agreement, be delegated to the employees or agents of the
Class B Member (any such designated employees or agents of the Class B Member
being referred to herein as a "Designated Representative"), provided that the
Class B Member shall keep the Class A Member apprised of any such employees
or agents and their activities.
3.4.3. The Administrative Officer and any Designated Representative
appointed hereunder shall have the specific power and authority set forth in
this Agreement, in an employment agreement, if any, in a Collateral Agreement
and as otherwise delegated to such Administrative Officer and/or Designated
Representative by the Members; provided that the Administrative Officer and
any Designated Representative shall operate the Company subject to (i) basic
policy decisions adopted by the Members, (ii) specific limitations and
requirements of this Agreement and any other agreement executed by and
between the Administrative Officer and the Company and/or a Designated
Representative and the Company, as the case may be, and (iii) limitations
imposed under the Act. Notwithstanding any provision in this Agreement or
any other agreement to the contrary, neither the Administrative Officer nor
any Designated Representative shall have the authority, either individually
or acting in conjunction with each other or other Designated Representatives,
to do any act, make any decision, or engage in any transaction which requires
the approval of the Members as set forth in Section 3.2 hereof.
3.5. Fees, Compensation and Reimbursement of Expenses. Upon the funding
of the Acquisition and Construction Loan, the Company shall:
(a) reimburse the Class B Member for those costs, fees and
expenses set forth on Schedule 3.5.1 attached hereto; and
(b) reimburse the Class A Member for those costs, fees and
expenses set forth on Schedule 3.5.2 attached hereto.
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ARTICLE 4
THE MEMBERS
4.1. Meeting of Members. The Members shall hold meetings on a quarterly
basis or such other periodic basis as the Members may agree at such location
as the Members may agree. Any Member may call for a meeting by giving ten
(10) days prior written notice to the other Member, which notice shall
specify the purpose of the meeting; provided that the ten (10) days notice
period may be waived by the other Member.
4.2. Limitation of Liability. Each Member's liability for the debts,
obligations and liabilities of the Company shall be limited to the maximum
extent permitted by the Act and other applicable law.
4.3. Company Records. Each Member shall have access to all books and
records of the Company and to the Company's officers, attorneys and auditors
for any reasonable business purpose and shall be entitled to make copies of
such books and records at the Company's expense.
4.4. Duties of Members. Each Member shall have a fiduciary duty to the
other Member to take into account the best interests of the Company when
exercising its rights under this Agreement, provided that it shall not be a
breach of any Member's fiduciary duty to exercise any of its rights under
this Agreement. Notwithstanding this Section 4.4, the Class B Member
acknowledges and agrees that to the extent the Class A Member provides any
funds to the Company as lender and not by way of Additional Capital
Contribution in connection with the Permanent Loan, the Class A Member, in
its capacity as a lender to the Company, shall have no fiduciary duty to the
Class B Member hereunder, and all rights, duties and obligations of the Class
A Member shall be limited to and as set forth in the loan documents executed
in connection with such loan.
4.5. Activities of Members. Except as otherwise expressly provided in
this Agreement or in any Collateral Agreement, no Member or Affiliate of any
Member shall be obligated to devote its, his or their exclusive time and
effort to the business or affairs of the Company, but each Member shall
devote sufficient time, effort and resources (including employees or agents
of such Member) to the business or affairs of the Company as in its judgment
is reasonably required to fulfill its obligations and role in the Company's
businesses and to promote the purposes of the Company, provided, however,
that the Class B Member shall employ and maintain such employees and agents
as shall be necessary to fully perform the duties described in Section 3.4
hereof.
4.6. Independent Activities of Members. Except as otherwise expressly
provided in or limited by a Collateral Agreement, each Member (acting on its
own behalf) and its Affiliates may, notwithstanding this Agreement, engage in
any activities it may choose, whether the same operate
10
the same type of business as the Company or are competitive with the Company
and neither this Agreement nor any activity undertaken pursuant hereto shall
prevent any Member or its Affiliates from engaging in such activities or
require any Member to permit the Company or any other Member to participate
in such activity.
4.7. Dealings with the Company.
4.7.1. Except as otherwise expressly provided in or limited by this
Agreement or a Collateral Agreement, no Member or Affiliate of any Member
shall contract and deal with the Company as an independent contractor,
employee or as an agent for others, or receive fees or other compensation
from such others or the Company, including without limitation, brokerage
fees, commission fees or any other payment on account of the leasing,
operations, management, financing or refinancing in connection with the Land
or Project, unless and until such Member or the Affiliate of such Member
first provides the other Member with the terms of such proposed dealings and
obtains the prior written consent to such dealing, contract or undertaking
from the other Member.
4.7.2. Notwithstanding Section 4.7.1 hereof, each Member hereby
acknowledges and agrees that, in connection with the transactions
contemplated by this Agreement, the Company shall execute the Construction
Management Agreement, the Developer's Agreement, the Land Acquisition
Agreement and the Leasing and Management Agreement pursuant to each of which
the Class B Member or its Affiliates shall perform certain functions set
forth in each agreement and shall receive the fee for the performance of such
functions as set forth therein.
4.8. Covenant not to Withdraw. Notwithstanding any provision in the Act,
each Member hereby covenants and agrees that the Member has entered into this
Agreement and formed the Company based on its expectation that each Member
will continue as a Member of the Company and carry out the duties and
obligations undertaken by it in this Agreement and the Collateral Agreements
and that, except as otherwise expressly required or permitted hereby, each
Member hereby covenants and agrees not to, without the consent of the other
Member (a) take any action to file a certificate of dissolution or its
equivalent with respect to such Member, (b) take any action that would cause
the voluntary Bankruptcy of such Member, (c) withdraw or attempt to withdraw
from the Company, unless pursuant to a Permitted Transfer in accordance with
Section 7.2 hereof, (d) Transfer all or any portion of its Interest in the
Company except as otherwise provided in Article 7 hereof, or (e) demand a
return of such Member's Capital Contribution or Capital Account prior to the
dissolution and liquidation of the Company pursuant to Section 12.1 hereof.
4.9. Additional Members. Additional Members shall be admitted to the
Company upon the unanimous agreement of the Members; provided that such
Members also shall unanimously agree on the capital contributions, if any, to
be made by such additional Member, the Interests in the Company to which such
Member shall be entitled and the expected duties and obligations of such
additional Member. Notwithstanding this Section 4.9, no Person shall be
admitted to the
11
Company as an additional Member unless such Person executes a counterpart to
this Agreement thereby agreeing to be bound by the terms and provisions of
this Agreement as if he, she or it were an original Member.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of Members. By execution and
delivery of this Agreement, each Member hereby makes to the other Member the
representations and warranties set forth in this Section 5.1 to the extent
applicable to such Member. Any and all representations and warranties set
forth in this Section 5.1 shall survive the execution of this Agreement. For
purposes of this Article 5, the term "Member" shall include such Member's
Affiliates that are undertaking or performing any services or activities in
connection with the transactions contemplated in this Agreement or any of the
Collateral Agreements, and any representations and warranties made by a
Member hereunder shall be deemed to include representations and warranties,
as appropriate, with respect to such Affiliates.
5.1.1.Organization. Such Member is a limited partnership or general
partnership, as applicable, duly organized and formed, validly existing and
in good standing under the laws of the State of Delaware and has all
requisite power and authority to own, lease and operate its property and to
carry on its business as of the date hereof and as contemplated by this
Agreement. Each Member is duly qualified to do business and is in good
standing as a limited partnership in each jurisdiction in which the failure
to be so licensed or qualified would have a material adverse effect on its
financial condition or its ability to perform its obligations under this
Agreement or any Collateral Agreement.
5.1.2. Proper Authorization and Power. Each Member has the
requisite power and authority to execute and deliver this Agreement and each
Collateral Agreement to which it is a party and to perform its obligations
hereunder and thereunder. The execution, delivery and performance of this
Agreement and each of the Collateral Agreements, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by
all necessary partnership action, and no other action on the part of the
Member or any Person is necessary to authorize the execution, delivery and
performance of this Agreement or any Collateral Agreement or the consummation
of the transactions contemplated hereby or thereby. This Agreement and each
of the Collateral Agreements constitutes a legal, valid and binding
obligation of such Member enforceable against it in accordance with their
respective terms. No consent, waiver, approval, license or authorization of,
or filing, registration or qualification with, or notice to, any governmental
unit or any other person is required to be made, obtained or given by the
Member or any Person in connection with the execution, delivery and
performance of this Agreement or any Collateral Document that has not been
heretofore obtained.
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5.1.3. Validity of Contemplated Transactions. The execution,
delivery and performance of this Agreement or any of the Collateral
Agreements and the consummation by the Member of the transactions
contemplated hereby or thereby does not and will not (i) require any filing
or registration with, or consent, authorization, approval or permit of, any
governmental or regulatory authority and (ii) violate, conflict with,
contravene, result in the breach of, or constitute a default under,
accelerate the performance required by, or require the consent,
authorization, or approval under (a) any terms, conditions or provisions of
the certificate of Limited Partnership of such Member, the partnership
agreement of such Member, or any material agreement or instrument to which
such Member is a party or by which such Member is made bound or to which any
of its properties or assets is subject, (b) any of the terms, conditions or
provisions of any law, regulation, order, writ, injunction, decree or
determination of any court or governmental or regulatory agency applicable to
such Member, or (c) any of the terms, conditions or provisions of any
indenture, mortgage, lease agreement or instrument to which such Member is a
party or may be bound or to which its properties or assets is subject.
5.1.4. Litigation. There are no actions, suits, proceedings, or
investigations pending, or to the knowledge of such Member threatened,
against or affecting such Member or any of its businesses, assets or
properties, before any court or governmental or regulatory agency which
could, if adversely determined, reasonably be expected to impair such
Member's ability to perform its obligations under this Agreement or any
Collateral Agreement or to have a material adverse effect on the financial
condition of such Member.
5.1.5. Investment Representations
(a) Such Member's Interest in the Company is intended to be and
is being acquired solely for its own account for investment and with no
present intention of distributing, reselling, pledging or otherwise disposing
of, all or any part thereof;
(b) Such Member is aware that Interests in the Company have not
been registered under the Securities Act or the applicable state securities
laws or the "Blue Sky" laws of any state, that Interests in the Company
cannot be distributed, sold, pledged or otherwise disposed of unless they are
registered thereunder or unless, in the opinion of counsel satisfactory to
the Company, an exemption from such registration is available, and that the
Company has no intention of so registering Interests in the Company
thereunder and is under no obligation to do so and that accordingly the
Member is able and is prepared to bear the economic risk that may be
associated with respect to its Interest in the Company;
(c) Such Member understands that the Interests are being
offered and sold in reliance upon specific exemptions from the registration
requirements of federal and state securities laws and that the Company is
relying upon the truth and accuracy of the representations and warranties set
forth herein in order to determine the applicability of such exemptions and
the suitability of the Members to acquire Interests; and
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(d) Such Member agrees that in addition to the other
restrictions on transfer set forth in this Agreement, it will not sell or
otherwise dispose of its Interest unless a registration statement under the
Securities Act shall be in effect with respect thereto and such Member shall
have complied with all provisions of the Securities Act and all applicable
state securities laws or at the Company's request, the Member shall have
obtained an opinion of counsel that such proposed sale or disposition will
not require registration under the Securities Act or any applicable state
securities laws.
ARTICLE 6
INDEMNIFICATION
6.1. Liability. No Member or any Affiliate of any Member or any
Designated Representative, if appointed pursuant to Section 3.4 hereof, shall
be liable, responsible, accountable in damages or otherwise to the Company or
any Member for any act or failure to act hereunder in connection with the
Company and its business or in the operation and maintenance of the Project
unless the act or omission is attributed to gross negligence, willful
misconduct or fraud or constitutes a material breach by such person of any
term or provision of this Agreement or a Collateral Agreement; provided that
nothing in this Section 6.1 is intended to limit, modify or alter any
Member's liability or obligations under any Collateral Agreement except to
the extent expressly set forth therein.
6.2. Company Indemnification. To the fullest extent permitted by law,
each Member and each Affiliate of any Member, as well as each Designated
Representative appointed pursuant to Section 3.4 (each of the foregoing being
referred to herein as an "Indemnitee", and each Affiliate to which each such
Indemnitee is related being referred to herein as such Indemnitee's "Related
Person") shall be indemnified, defended and held harmless by the Company to
the fullest extent permitted by the Act for, from and against any and all
losses, claims, damages, liabilities, expenses (including reasonable
attorneys' fees and costs), judgments, fines, settlements, demands, actions,
or suits relating to or arising out of the business of the Company or the
operation and maintenance of the Project, or the exercise by the Indemnitee
of any authority conferred on it, him or them hereunder or the performance by
the Indemnitee of any of its, his or their duties and obligations under this
Agreement. Notwithstanding anything contained in this Agreement to the
contrary, no Indemnitee shall be entitled to indemnification hereunder with
respect to any claim, issue or matter: (i) in respect of which it, he or its
or his Related Person (or the Company as the result of an act or omission of
such Related Person) has been adjudged liable for fraud, gross negligence or
willful misconduct; (ii) based upon or relating to a material breach by it,
him or his or its Related Person of any term or provision of this Agreement
or any Collateral Agreement; or (iii) for costs or expenses incurred by the
Indemnitee in connection with a claim or action against it, him or his or its
Related Person by another Member or such other Member's Related Person that
is not related to the Indemnitee's actions under this Agreement.
Notwithstanding this Section 6.2, no Member shall be entitled to
indemnification by the Company when or if acting in a
14
capacity with the Company as other than a Member, in which case, such right
to indemnification shall be governed by an agreement, if any, between the
Company and the Member.
6.3. Member Indemnification. Each Member (the "Indemnitor Member") shall
indemnify, defend and hold harmless the other Member (the "Indemnitee
Member") from and against any and all losses, claims, damages, liabilities,
expenses (including reasonable attorneys' fees and costs), judgments, fines,
settlements, demands, actions, or suits relating to or arising out of any (i)
fraud, gross negligence or willful misconduct for which the Indemnitor Member
or any of its Affiliates or Related Persons (or the Company as the result of
an act or omission of any of the same) has been adjudged liable; (ii)
material breach by the Indemnitor Member of any term or provision of this
Agreement or any Collateral Agreement, and (iii) material breach or
inaccuracy in any representation or warranty made by such Indemnitor Member
in this Agreement or any Collateral Agreement.
6.4. Class B Member Indemnification. Notwithstanding any provision in
this Agreement to the contrary and in addition to the indemnification set
forth in Section 6.3 hereof, the Class B Member shall indemnify, defend and
hold wholly harmless the Class A Member, the Company and Brandywine Realty
Trust from and against any and all Additional Delaware Realty Transfer Taxes
(as defined in this Section 6.4) relating to or arising out of the Company's
obligation to pay Delaware realty transfer taxes due in connection with the
conveyance of the Land to the Company pursuant to the Land Acquisition
Agreement. For purposes of this Section 6.4, "Additional Delaware Realty
Transfer Taxes" shall mean any Delaware realty transfer taxes (in excess of
the amount of Delaware Realty Transfer Taxes paid by the Company at the
closing of the Land Acquisition) that are or become due and payable by the
Company as a result of the conveyance of the Land pursuant to the Land
Acquisition Agreement, including any and all penalties and interests imposed
thereon; provided, however, that Additional Delaware Realty Transfer Taxes
shall not include any Delaware Realty Transfer Taxes imposed on the Company
as a result of obtaining a building permit or a certificate of occupancy in
connection with the Project. Any indemnification hereunder by the Class B
Member shall not be deemed to be a capital contribution to the Company by the
Class B Member but shall constitute an expense of the Class B Member.
ARTICLE 7
TRANSFERS
7.1. Transfer Restrictions. Except as otherwise provided in this
Agreement, no Member shall make any Transfer of all or any portion of its
Interest, including, without limitation, a Transfer of a right to Profits,
Losses or distributions hereunder, unless and until the other Member consents
to the Transfer and the transferor Member and the proposed Transferee comply
with the provisions of this Article 7. Any Transfer in violation of the
requirements of this Agreement shall be null and void ab initio and of no
force or effect whatsoever. Each Member hereby acknowledges the
reasonableness of the restrictions on Transfer imposed by this Agreement in
15
view of the Company's purpose and the relationship of the Members.
Accordingly, the restrictions on Transfer set forth herein shall be
specifically enforceable.
7.2. Permitted Transfers. Notwithstanding Section 7.1, a Member may
Transfer all or any portion of its Interest in the Company to (i) another
Member, and (ii) one of its Affiliates (in each case, a "Permitted
Transfer"), provided that a Permitted Transfer to an Affiliate shall comply
with the provisions of Section 7.3.
7.3. Conditions of Transfer. Notwithstanding Section 7.2 hereof, a
Transfer (including a Permitted Transfer to an Affiliate under Section 7.2)
shall not be allowed unless and until the following conditions precedent are
satisfied, and once satisfied, the Transferee shall succeed to all rights and
be subject to all obligations of the transferring Member with respect to the
transferred Interest:
7.3.1. all agreements, articles, minutes, written consents and all
other necessary documents and instruments shall have been executed and filed
and all other acts shall have been performed which the non-transferring
Member deems necessary to make the Transferee a substitute Member of the
Company, including, without limitation, the execution by such Transferee of a
counterpart signature page to this Agreement pursuant to which the Transferee
shall assume any and all obligations and have all rights and interests under
this Agreement with respect to the transferred Interest; and
7.3.2. unless otherwise waived by the non-transferring Member, the
non-transferring Member shall have received such assurances as may be
necessary or appropriate in the opinion of counsel to the Company to confirm
that Transfer would not (i) violate the Securities Act or any state
securities laws or cause the Company to register thereunder; (ii) require the
Company to register as an investment company under the Investment Company
Act; (iii) cause the Company to be treated as other than a partnership for
federal income tax purposes; and (iv) will not terminate the Company for
federal income tax purposes;
7.3.3. unless otherwise waived by the non-transferring Member, the
non-transferring Member shall have received such assurances as it deems
necessary or appropriate to confirm that such Transferee has the ability to
perform all of the Transferor's obligations set forth in this Agreement and
the Collateral Agreements, provided that, unless expressly agreed by the
non-transferring Member, the Transferor shall not be relieved of any of its
liabilities or obligations under this Agreement or any Collateral Agreement;
and
7.3.4. all reasonable expenses incurred by the Company and the
non-transferring Member in connection with the Transfer shall have been paid
by or for the account of the Transferee.
7.4. Transfers; Recharacterization. If any Interest is transferred
during any Fiscal Year in compliance with the provisions of this Agreement,
Profits, Losses, each item thereof, and all other
16
items attributable to such transferred Interest for such period shall be
divided and allocated between the Transferor and the Transferee by taking
into account their varying interests during the period in accordance with
section 706(d) of the Code, using any conventions permitted by law and
reasonably selected by the non-transferring Member.
7.5. Conversion of Class B Member. Notwithstanding the provisions of
this Article 7, the Members acknowledge that subsequent to the closing of the
Land Acquisition, the Class B Member will convert from a Delaware general
partnership to a Delaware limited liability company pursuant to and in
accordance with Delaware law; provided that the Class B Member shall obtain
the prior written consent of the Class A Member, which consent shall not be
unreasonably withheld, as to the conversion, and provided, further, that all
of the representations and warranties set forth in Section 5.1 hereof (other
than Section 5.1.1) and made by the Class B Member shall remain true and
correct with respect to the Class B Member notwithstanding the conversion.
ARTICLE 8
BUY-SELL PROVISIONS
8.1. Mutual Disagreement. In the event of a Mutual Disagreement, the
Members shall have the rights of mandatory purchase and sale provided in this
Article 8. For purposes of this Article 8, "Mutual Disagreement" shall
mean the failure the Members to mutually agree upon a Major Action to be
undertaken by the Company, which failure remains unresolved for a period
ending on the twentieth (20th) day following the submission of a written
notice by one Member to the other Member stating that such failure to agree
on a Major Action has occurred (the "Election Day").
8.2. Mandatory Buy-Sell of Interests.
8.2.1. In the event of a Mutual Disagreement, a Member (the
"Electing Member") may deliver to the other Member (the "Notice Member") a
written notice (the "Election Notice"), which Election Notice shall include
an irrevocable offer by the Electing Member either (i) to sell all but not
less than all of the Electing Member's Interest in the Company to the Notice
Member (the "Offer to Sell"), or (ii) to purchase all, but not less than all,
of the Notice Member's Interest in the Company (the "Offer to Purchase" and
together with the Offer to Sell, the "Offers"). The Election Notice also
shall set forth the Gross Value of the Project to be used in computing the
Net Equity Value of a Member's Interests. The price at which a Member's
Interest may be purchased or sold under this Section 8.2 (the "Buy-Sell
Price") is the Net Equity Value of a Member's Interest, determined as of the
Election Day.
8.2.2. For a period ending on the forty-fifth (45th) day following
the Election Day (the "Election Period"), the Notice Member shall have the
right to accept either the Offer to Sell or the Offer to Purchase. Upon
acceptance by the Notice Member of one of the Offers, the
17
Electing Member and the Notice Member shall be required to sell or required
to purchase, as the case may be, for the Buy-Sell Price.
8.2.3. If the Notice Member fails to accept either the Offer to Sell
or the Offer to Purchase within the Election Period, then, the Offers
automatically shall expire and be of no force or effect, and the Notice
Member shall be deemed to have made to the Electing Member an offer (the
"Counter-Offer") to sell all, but not less than all, of the Notice Member's
Interest in the Company for the Buy-Sell Price. Pursuant to the
Counter-Offer, the Electing Member shall be obligated to purchase, and the
Notice Member shall be required to sell, all but not less than all of the
Notice Member's Interest in the Company at the Buy-Sell Price.
8.2.4. The Member purchasing the Interests under this Section 8.2,
whether pursuant to one of the Offers or the Counter-Offer, as the case may
be, shall be referred to as the "Purchasing Member" and the Member selling
such Interests as the "Selling Member."
8.3. Closing of Purchase or Sale. The closing of the purchase or sale
under Section 8.2 shall occur on a date and time and at a place mutually
agreeable to the Electing Member and the Notice Member, provided that such
closing shall not be later than forty-five (45) days after the expiration of
the Election Period; and provided, further, that if the Members cannot agree
on the place of the closing, the closing shall take place at the law offices
of Pepper, Xxxxxxxx & Xxxxxxx LLP at the address set forth in Section 13.2.1
hereof. At the closing, the Purchasing Member shall pay to the Selling
Member, by cash or other immediately available funds, the Buy-Sell Price,
and the Selling Member shall deliver to the Purchasing Member good title,
free and clear of any liens, claims, encumbrances, security interests or
options of its Interests in the Company, and the Purchasing Member shall
agree to indemnify and hold harmless the Selling Member from any and all
claims arising in connection with said Interests that accrue after the date
of the closing. At the closing, the Purchasing Member and the Selling Member
agree to execute such documents and instruments of conveyance as may be
necessary or appropriate to confirm the transactions contemplated hereby.
8.4. Definitions. For purposes of this Article 8, the following terms
shall have the definitions set forth in this Section 8.4.
(a) "Gross Value of the Project" shall be the fair market value
of the Project as of the Election Day as determined by the Electing Member
and set forth in the Election Notice.
(b) "Net Equity Value of a Member's Interest" shall be, as of
any day, the amount that would be distributed to such Member in liquidation
of the Company pursuant to Section 12.3 hereof if and assuming that the
following first occurred: (i) the Project were sold for the Gross Value of
the Project, (ii) the Company paid all apportionments and costs customarily
made and/or paid in the closing of a real estate transaction in Delaware
(iii) the Company paid its accrued, but unpaid liabilities and established
reserves for any contingent liabilities pursuant to
18
Section 12.3.3, including without limitation, the Acquisition and
Construction Loan or the Permanent Loan (without prepayment premium or
penalty), as applicable; provided that the Net Equity Value of a Member's
Interest shall be adjusted to reflect (a) the Unreturned Preferred Capital of
the Selling Member and Purchasing Member, (b) the accrued and unpaid
Preferred Returns of the Selling Member and the Purchasing Member, and (c)
any Capital Loans owing to the Selling Member or Purchasing Member.
ARTICLE 9
ALLOCATIONS OF PROFITS AND LOSSES
9.1. Allocations of Profits. After giving effect to the special
allocations set forth in Section 9.3 hereof, Profits for any Fiscal Year
shall be allocated to the Members in the following order and priority:
9.1.1. First, to the Members until the cumulative Profits allocated
pursuant to this Section 9.1.1 are equal to the cumulative Losses allocated
to the Members pursuant to Section 9.2. hereof for all prior periods (without
duplication) in reverse order to which the prior Losses were allocated.
9.1.2. Second, one hundred percent (100%) to the Members, in
accordance with their respective Preferred Return Percentage, until:
(a) the Class A Member has been allocated an amount equal to
the excess, if any, of (1) the sum of the cumulative distributions made to
the Class A Member pursuant to Sections 10.1.1(a), 10.2.1(a) and 12.3.4 in
respect of (i) the Class A Member Preferred Return on Initial Capital from
the Initial Capital Date to the end of the Fiscal Year and (ii) the Class A
Member Preferred Return on Additional Capital from the Additional Capital
Date to the end of the Fiscal Year, over (2) the cumulative amounts allocated
to the Class A Member pursuant to this Section 9.1.2(a) for all prior Fiscal
Years; and
(b) the Class B Member has been allocated an amount equal to
the excess, if any, of (i) the cumulative distributions made to the Class B
Member in respect of the Class B Member Preferred Return on Additional
Capital pursuant to Sections 10.1.1(b), 10.2.1(b) and 12.3.4 from the
Additional Capital Date to the end of the Fiscal Year, over (ii) the
cumulative amounts allocated to the Class B Member pursuant to this Section
9.1.2(b) for all prior Fiscal Years.
9.1.3. Third, one hundred percent (100%) to the Class B Member to
the extent of the excess, if any, of (i) the cumulative distributions made to
the Class B Member in respect of the Class B Member Subordinated Preferred
Return on Initial Capital pursuant to Sections 10.1.2, 10.2.2 and 12.3.4 from
the Initial Capital Date to the end of the Fiscal Year, over (ii) the
19
cumulative amounts allocated to the Class B Member pursuant to this Section
9.1.3 for all prior Fiscal Years.
9.1.4. Thereafter, to the Members in accordance with their
Percentage Interests.
9.2. Allocation of Losses. After giving effect to the special
allocations set forth in Section 9.3 hereof, Losses for any Fiscal Year
shall be allocated to the Members in the following order and priority:
9.2.1. First, to the extent any Profits have been allocated pursuant
to Section 9.1 hereof, Losses shall be allocated first to offset any Profits
allocated pursuant to Section 9.1.4, then to offset Profits allocated
pursuant to Section 9.1.3, and then to offset Profits allocated pursuant to
Section 9.1.2, in each case in an amount up to the amount of any Profits
previously allocated under the respective section. To the extent Profits are
offset pursuant to this Section 9.2.1, such allocations shall be disregarded
for purposes of computing subsequent allocations pursuant to this Section
9.2.1.
9.2.2. Next, to the Members in accordance with their Percentage
Interests.
9.2.3. Notwithstanding Section 9.2.1 and 9.2.2, no amount of Loss
shall be allocated to a Member to the extent that such allocation would cause
or increase a deficit balance in such Member's Capital Account, as adjusted.
Rather, such amount of Loss shall be allocated to the Member with positive
Capital Account, provided, however, that if no Member has a positive Capital
Account at the time of such allocation, Losses shall be allocated to the
Members in accordance with Section 9.2.2, provided further, that to the
extent that Losses have been allocated to a Member pursuant to this Section
9.2.3, then, notwithstanding Section 9.1 hereof, subsequent Profits shall be
allocated to that Member under this Section 9.2.3 until the aggregate Profits
allocated to such Member hereunder shall be equal to the aggregate Losses
allocated under this Section 9.2.3 for all prior periods.
9.3. Special Allocations. Notwithstanding anything in this Agreement to
the contrary, the following special allocations shall be made as follows:
9.3.1. All Nonrecourse Deductions for each Fiscal Year shall be
allocated to the Members in proportion to their respective Percentage
Interests. For purposes of Treasury Regulation Section 1.752-3, all excess
nonrecourse liabilities of the Company will be allocated between the Members
in proportion to their respective Percentage Interests.
20
9.3.2.Any items of income, loss, gain or deduction that are
attributable to Member Nonrecourse Debt shall be allocated to those Members
who bear the economic risk of loss for such debt in accordance with Treasury
Regulation Section 1.704-2(i).
9.3.3. If there is a net decrease in Minimum Gain for a taxable year
of the Company, then, unless and except to the extent that the exceptions
provided in Treasury Regulations Section 1.704-2(f)(2) through (5) are
applicable, before any other allocation is made for such taxable year, each
Member shall be allocated items of income and gain for such year (and, if
necessary, for subsequent years) in an amount equal to the portion of such
Member's share of the net decrease in Minimum Gain, as such share is
determined in accordance with Treasury Regulations Section 1.704-2(g)(2).
This Section 9.3.2 is intended to qualify as a "minimum gain chargeback"
under Treasury Regulation Section 1.704-2(f)(1) and shall be interpreted in a
manner consistent therewith.
0.0.0.Xx the extent that any Member unexpectedly receives any
adjustment, allocation, or distribution described in subparagraphs (4), (5),
or (6) of Treasury Regulation Section 1.704-1(b)(2)(ii)(d), which adjustment,
allocation or distribution creates or increases a deficit in that Member's
Capital Account, then, items of Company income and gain shall be specially
allocated to such Member in an amount and manner sufficient to eliminate the
deficit balance in its Capital Account created by such adjustment,
allocation, or distribution as quickly as possible. Any special allocations
of items of income or gain pursuant to this provision shall be taken into
account in computing subsequent allocations of Profits so that the net amount
of any items so allocated and the Profits, Losses and all other items
allocated to each Member shall, to the extent possible, be equal to the net
amount that would have been allocated to each such Member pursuant to the
other provisions of this Agreement if such unexpected adjustments,
allocations or distributions had not occurred. The foregoing is intended to
qualify as a "qualified income offset" within the meaning of Treasury
Regulation Section 1.704-1(b)(2)(ii)(d) and shall be applied in a manner
consistent with that Treasury Regulation.
9.4. Curative Allocations. The allocations set forth in Sections 9.2.3
and 9.3 (the "Regulatory Allocations") are intended to comply with certain
requirements of Treasury Regulation Section 1.704-1(b) and 1.704-2.
Notwithstanding any other provision of this Article 9 (other than the
Regulatory Allocations), the Regulatory Allocations shall be taken into
account in allocating other items of Company income, gain, loss, deduction or
credit among the Members so that, to the extent possible, the net amount of
such allocations or other items of income, gain, loss, deduction or credit
and the Regulatory Allocations to each Member shall be equal to the net
amount that would have been allocated to each such Member if the Regulatory
Allocations had not occurred.
9.5. Allocations for Tax Purposes. In the event the book value of any
Company asset differs from its adjusted tax basis (upon contribution,
revaluation or otherwise), all income, gain, loss and deduction with respect
to such asset shall be allocated to the Members in a manner that takes into
account the variation between such book value and adjusted tax basis for such
property
21
for federal income tax purposes, pursuant to section 704(c) of the Code or
pursuant to the principles thereof using any reasonable allocation method
(including curative allocations) as may be determined by the Members or, if
the Members so elect, the Company's accountants. Allocations made under this
Section 9.5 are made solely for federal, state or local income tax purposes
and shall not affect, or in any way be taken into account in computing, any
Member's Capital Account or share of Profits, Losses, or other items or
distributions pursuant to any provision of this Agreement.
ARTICLE 10
DISTRIBUTIONS
10.1. Net Cash From Operations. Except as otherwise provided in Section
12.3 (relating to liquidating distributions), Net Cash From Operations shall
be distributed not later than thirty (30) days after the end of each fiscal
quarter of each Fiscal Year in the following order and priority:
10.1.1. First, one hundred percent (100%) to the Members, in
accordance with their respective Preferred Return Percentage, until:
(a) the Class A Member has been distributed an amount equal to
the excess, if any, of (1) the sum of the (i) the Class A Member Preferred
Return on Initial Capital from the Initial Capital Date to the end of such
fiscal quarter and (ii) the Class A Member Preferred Return on Additional
Capital from the Additional Capital Date to the end of such fiscal quarter,
over (2) the sum of all prior distributions to the Class A Member in respect
of the Class A Member Preferred Return on Initial Capital and the Class A
Member Preferred Return on Additional Capital pursuant to this Section
10.1.1(a) and Section 10.2.1 (a); and
(b) the Class B Member has been distributed an amount equal to
the excess, if any, of (i) the Class B Member Preferred Return on Additional
Capital from the Additional Capital Date to the end of such fiscal quarter,
over (ii) the sum of all prior distributions to the Class B Member in respect
of the Class B Member Preferred Return on Additional Capital pursuant to this
Section 10.1.1(b) and Section 10.2.1 (b)
10.1.2. Second, one hundred percent (100%) to the Class B Member to
the extent of the excess, if any, of (i) the Class B Member Subordinated
Preferred Return on Initial Capital from the Initial Capital Date to the end
of such fiscal quarter, over (ii) the sum of all prior distributions to the
Class B Member in respect of the Class B Member Subordinated Preferred Return
on Initial Capital pursuant to this Section 10.1.2 and Section 10.2.2.
10.1.3. Thereafter, to the Members in accordance with their Percentage
Interests.
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10.2. Net Cash From Sales or Refinancings. Except as otherwise provided
in Section 12.3 (relating to liquidating distributions), Net Cash From Sales
or Refinancings, if any, realized or available to the Company shall be
distributed as soon as practicable, as determined by the Members, in the
following order and priority:
10.2.1. First, one hundred percent (100%) to the Members, in accordance
with their respective Preferred Return Percentage, until:
(a) the Class A Member has received an amount equal to the
excess, if any, of (1) the sum of (i) the Class A Member Preferred Return on
Initial Capital from the Initial Capital Date to the date on which the event
giving rise to such Net Cash From Sales or Refinancings occurred, and (ii)
the Class A Member Preferred Return on Additional Capital from the Additional
Capital Date to the date on which the event giving rise to such Net Cash From
Sales or Refinancings occurred, over (2) the sum of all prior distributions
to the Class A Member in respect of the Class A Member Preferred Return on
Initial Capital and the Class A Member Preferred Return on Additional Capital
pursuant to this Section 10.2.1(a) and Section 10.1.1(a); and
(b) the Class B Member has received an amount equal to the
excess, if any, of (i) the Class B Member Preferred Return on Additional
Capital from the Additional Capital Date to the date on which the event
giving rise to such Net Cash From Sales or Refinancings occurred, over (ii)
the sum of all prior distributions to the Class B Member in respect of the
Class B Member Preferred Return on Additional Capital pursuant to this
Section 10.2.1(b) and Section 10.1.1(b).
10.2.2. Second, one hundred percent (100%) to the Class B Member to
the extent of the excess, if any, of (i) the Class B Member Subordinated
Preferred Return on Initial Capital from the Initial Capital Date to the date
on which the event giving rise to such Net Cash From Sales or Refinancings
occurred, over (ii) the sum of all prior distributions to the Class B Member
in respect of the Class B Member Subordinated Preferred Return on Initial
Capital pursuant to this Section 10.2.2 and Section 10.1.2.
10.2.3. Third, one hundred percent (100%) to the Members, in accordance
with their respective Preferred Return Percentage, until
(a) the Class A Member has received an amount equal to the sum
of the Class A Member Unreturned Additional Capital and the Class A Member
Unreturned Initial Capital; and
(b) the Class B Member has received an amount equal to the
Class B Member Unreturned Additional Capital.
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10.2.4. Fourth, one hundred percent (100%) to the Class B Member
until the Class B Member Unreturned Initial Capital has been reduced to zero;
10.2.5. Thereafter, to the Members in accordance with their
Percentage Interests.
10.3. Authority to Withhold. Upon the written advice of the Company's
legal tax counsel, the Company shall be entitled to collect, withhold and
make payments on behalf of or with respect to any Member's allocable share of
Company income or gain, in amounts required to discharge any obligation of
the Company to withhold or make payments to any governmental authority with
respect to any federal, state, and local tax liability of such Member arising
as a result of such Member's Interest in the Company. Any amount withheld
pursuant to the foregoing sentence shall be treated for all purposes of this
Agreement as having been paid or distributed to such Member and shall reduce,
on a dollar for dollar basis, amounts otherwise payable of distributable to
such Member under this Agreement. Each Member hereby agrees to indemnify
and hold harmless the Company for, from and against any liability with
respect to amounts paid or withheld under this Section 10.3 on behalf of or
with respect to such Member.
ARTICLE 11
BOOKS, RECORDS, REPORTS AND ACCOUNTING
11.1. Books and Records. The Company shall keep or cause to be kept at
its principal place of business appropriate books and records, including
without limitation, the following: (a) true and full financial information
regarding the status of the Project and financial condition of the Company,
including without limitation, records of all costs and expenses incurred, all
changes made, all credits made and received, and all income derived in
connection with the business of the Company; (b) promptly after becoming
available, a copy of the Company's federal, state and local income tax
returns for each year; (c) a copy of this Agreement and Certificate of
Formation and all amendments thereto, together with executed copies of any
written powers of attorney pursuant to which this Agreement and the
Certificate of Formation and all amendments thereto have been executed; and
(d) other information regarding the affairs of the Company as is just and
reasonable.
11.2. Company's Accountants. The Members hereby select and appoint
Xxxxxx Xxxxxxxx LLP to be the Company's independent accountants.
11.3. Fiscal Year. The Fiscal Year of the Company shall be the calendar
year or such other accounting period as shall be required under the Code or
as may be determined by the Company's independent accountants.
11.4. Accounting Period. Unless otherwise determined by the Company's
independent accountants, the Company shall use the accrual method of
accounting in maintaining its books and records and in preparation of its
financial statements for federal income tax purposes.
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11.5. Annual Reports. Within forty-five (45) days after the close of
each Fiscal Year, the Administrative Officer shall cause the Company to have
prepared, and furnished to each Member, audited financial statements,
presented in accordance with generally accepted accounting principles,
including without limitation, copies of (i) the balance sheet of the Company,
(ii) the Company's income statement, (iii) a statement of the Company's cash
flow, (iv) a statement of the Member's Capital Accounts and Preferred Capital
and (v) a statement of source and application of funds each as of the last
day of the Fiscal Year.
11.6. Quarterly Reports. Within twenty (20) days after the close of each
fiscal quarter, the Administrative Officer shall cause the Company to prepare
and furnish to each Member quarterly reports of (i) the Company's
operations, (ii) quarterly unaudited balance sheets and income statements,
and (iii) quarterly statements of cash flow.
11.7. Preparation of Tax Returns. Within ninety (90) days after the end
of each Fiscal Year, the Administrative Officer shall cause the Company to
arrange for the preparation and timely filing of all tax returns of the
Company for federal, state and local income tax purposes and shall cause to
be furnished to the Members the tax information reasonably required for
federal and state income tax reporting purposes.
11.8. Tax Controversies. The Members hereby appoint and designate the
Class A Member as the initial Tax Matters Member, and the Class A Member
shall authorize and require one of its officers (the "Tax Matters
Representative") to represent the Company (at the Company's expense) in
connection with all examinations of the Company's affairs by tax authorities,
including resulting administrative and judicial proceedings, and to expend
Company funds for professional services and costs associated therewith. Each
Member agrees to cooperate with the Tax Matters Representative and to do or
refrain from doing any or all things reasonably required by the Tax Matters
Representative in conducting those proceedings. The Tax Matters
Representative shall promptly notify the each Member upon the receipt of any
correspondence from any federal, state or local tax authorities relating to
any examination of the Company's affairs.
11.9. Tax Elections. Any and all elections for federal, state and local
tax purposes, including without limitation, any election (i) to adjust the
basis of the Company Property pursuant to Code Section 754, 734(b) and
743(b), or comparable state or local law, in connection with Transfers of
Interests in the Company; and (ii) to extend the statute of limitations for
assessment of tax deficiencies against the Company and the Members with
respect to adjustments to the Companies federal, state or local tax returns
shall be made by the Members.
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ARTICLE 12
DISSOLUTION AND LIQUIDATION
12.1. Dissolution. The Company shall dissolve upon the earliest to occur
of any of the following:
(a) upon the affirmative vote of the Members;
(b) upon the sale of the Project and the repayment and
satisfaction in full of any financing undertaken by the
Company in respect thereof;
(c) an entry of a decree of judicial dissolution pursuant to the
Act; or
(d) December 31, 2050.
12.2. Bankruptcy of a Member. The Bankruptcy of a Member shall not
dissolve the Company under the Act. Upon the Bankruptcy of a Member, the
non-Bankrupt Member shall have the sole right to manage the Company, and the
rights of the Bankrupt Member shall be limited to the right to share in the
profits and losses and distributions of the Company to the extent provided in
this Agreement and the Bankrupt Member shall not have any right to
participate in the management or operation of the Company.
12.3. Liquidation. Upon the dissolution of the Company, the Company
shall cease to carry on its business, except insofar as may be necessary for
the winding up of its business, but its separate existence shall continue
until the Certificate of Cancellation has been filed as required by the Act.
Upon dissolution of the Company, the Members shall designate a Person to act
as the liquidating trustee (the "Liquidating Trustee") and the business and
affairs of the Company shall be wound up and subject to Section 12.3 hereof,
the Company liquidated as rapidly as business circumstances permit, and the
proceeds thereof shall be distributed (to the extent permitted by applicable
law) in the following order and priority:
12.3.1. To the payment of the debts and liabilities of the Company
(other than those to Members) in the order of priority provided by law.
12.3.2. To the payment of the expenses of liquidation of the Company
in the order of priority provided by law, provided that the Company shall
first pay, to the extent permitted by law, liabilities or debts owed to
Members.
12.3.3. To the setting up of such reserves as the Liquidating
Trustee may deem reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Company arising out of or in connection
with the Company's business, provided that any such reserve will be held by
the Liquidating Trustee for the purposes of disbursing such reserves in
payment of any of the
-26-
aforementioned contingencies and at the expiration of such period as the
Liquidating Trustee shall deem advisable (but in no case to exceed eighteen
(18) months from the date of liquidation unless an extension of time is
consented to by the Members), to distribute the balance thereafter remaining
in the manner hereinafter provided.
12.3.4. The balance of the proceeds, if any, to be distributed on or
before the later of (i) the end of the taxable year during which such
liquidation occurs or (ii) ninety (90) days after the date of such
liquidation, in accordance with and in the order set forth in Section 10.2
hereof.
12.4. No Liquidating Distributions in Kind. The Liquidating Trustee
shall not distribute, and no Member may demand or receive, property other
than cash in return for a Member's contributions, loans or advances, unless
the Members unanimously agree to a distribution in kind to any Member;
provided, however, that all Members receive, whether in kind or in cash and
whether from the Company or the Member receiving an in kind distribution, the
amount which such Member is entitled to receive under Section 10.2 hereof.
12.5. Deficit Capital Account. Upon liquidation, each Member shall look
solely to the assets of the Company for the return of that Member's Capital
Contribution. No Member shall be personally liable for a deficit Capital
Account balance of that Member, it being expressly understood that the
distribution of liquidation proceeds shall be made solely from existing
Company assets in the order and priority set forth in Section 12.3 hereof,
and to the extent applicable 12.4.
12.6. Certificate of Cancellation. Following dissolution and liquidation
of the Company, when all debts, liabilities and obligations have been paid,
satisfied, compromised or otherwise discharged, or adequate provisions have
been made therefore, and all of the remaining property and assets have been
distributed to Members, the Liquidating Trustee shall file a Certificate of
Cancellation as required by the Act.
12.7. Non-Recourse. No recourse shall be had for any of the obligations
of the Class A Member hereunder or for any claim based thereon or otherwise
in respect thereof, against any past, present or future trustee, shareholder,
officer or employee of Brandywine Realty Trust, whether by virtue of any
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all of such liability being expressly waived and released by the
Class B Member and any such Person who acts through the Class B Member.
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ARTICLE 13
MISCELLANEOUS
13.1. Amendments. This Agreement may not be amended, modified or revised
in any manner without the prior written consent of each of the Members.
13.2. Notice.
13.2.1. All notices, requests and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
delivered to a Member either personally or by sending a copy thereof by first
class or express mail, postage prepaid, or by telex or TWX (with answer back
received) or courier services, charges prepaid, or by telecopier, to such
Member's address (or to such party's telex, TWX, telecopier, or telephone
number) as follows:
If to the Class A Member:
c/o Brandywine Realty Trust
Newtown Corporate Campus
00 Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Xx., Chairman
Xxxxxx X. Xxxxxxx, President and
Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxxxxx, Esquire
Pepper, Xxxxxxxx & Xxxxxxx LLP
3000 Two Xxxxx Xxxxxx
Xxxxxxxxxx & Xxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (215) 981- 4750
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If to the Class B Member:
Gender Road Joint Venture
c/o The Commonwealth Group
00 Xxxx'x Xxx
Xxx Xxxxxx, Xxxxxxxx 00000
Attn.: Xxxxx X. Xxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxx, Esquire
Saul, Ewing, Xxxxxx & Xxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
13.2.2. Any such notice, request or communication shall be deemed to
be delivered, given and received for all purposes of this Agreement (i) as of
the date so delivered, if delivered personally or by telecopy to the person
entitled thereto, (ii) three (3) business days after being deposited in the
United States mail, if delivered by first class or express mail, postage
prepaid or (iii) one (1) business day after being deposited with a telegraph
office or courier service for delivery if notice is sent by telegraph, or
courier services.
13.3. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware and, to the maximum
extent possible, in such manner as to comply with all of the terms and
conditions of the Act.
13.4. Severability. If any provision of this Agreement shall be
conclusively determined by a court of competent jurisdiction to be invalid or
unenforceable to any extent, such provision shall be ineffective only to the
extent of such invalidity or unenforceability without invalidating or
affecting the remainder of this Agreement thereby.
13.5. Binding Effect. This Agreement shall inure to the benefit of and
be binding upon the Members and their respective successors and, where
permitted, their assigns and Affiliates.
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13.6. Titles and Captions. All article, section and paragraph titles and
captions contained in this Agreement are for convenience only and are not a
part of the context hereof.
13.7. No Third Party Rights. This Agreement is intended to create
enforceable rights between the parties hereto only, and creates no rights in,
or obligations to, any other Persons whatsoever.
13.8. Time is of Essence. Time is of the essence in the performance of
each and every obligation herein imposed.
13.9. Further Assurances. Each Member, upon the request of the other
Member, shall execute all further instruments and perform all further acts
which are or may become reasonably necessary to effectuate and to carry out
the matters contemplated by this Agreement.
13.10. Incorporation by Reference. Any reference to an Exhibit or
Schedule or Attachment herein, is hereby incorporated by reference in this
Agreement as if such Exhibit, Schedule or Attachment was set out in full in
the text of this Agreement.
13.11. Legal Representation. Each party to this Agreement acknowledges
that such party is represented by competent legal counsel and that such
counsel has fully reviewed this Agreement. This Agreement shall be construed
in accordance with its fair meaning without any presumption against the party
responsible for drafting this Agreement.
13.12. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes any and all prior and
contemporaneous agreements, arrangements or understandings between the
parties relating to the subject matter hereof. No oral understandings, oral
statements, oral promises or oral inducements exist. No representations,
warranties, covenants or conditions, express or implied, whether by statute
or otherwise, other than as set forth herein, have been made by the parties
hereto.
13.13. Counterparts. This Agreement may be signed in any number of
counterparts. with the same effect as if all of the Members had signed the
same document. All counterparts shall be construed together and shall
constitute but one and the same agreement. Any and all counterparts may be
executed by facsimile.
13.14. Execution of Certificate of Formation. The Members acknowledge and
agree that Xxxxxxxx X. Xxxx, Esquire of Pepper, Xxxxxxxx & Xxxxxxx LLP has
the power and authority to execute and file the Certificate of Formation with
the Secretary of State of the State of Delaware on behalf of the Members in
order to form the Company under the Act.
[SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Operating
Agreement of CHRISTIANA CENTER OPERATING COMPANY I LLC effective as of the
day and year first above written.
MEMBERS:
CLASS A MEMBER:
BRANDYWINE OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership, by
Brandywine Realty Trust, a Maryland Real
Estate Investment Trust, its sole general partner
By:___________________________________
Xxxxxx X. Xxxxxxx, President and
Chief Executive Officer
CLASS B MEMBER:
GENDER ROAD JOINT VENTURE,
a Delaware partnership
By:______________________________________
Xxxxx X. Xxxxxx, Managing Venturer,
Hereunto Duly Authorized
[END OF EXECUTIONS]
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EXHIBIT A
TO
OPERATING AGREEMENT OF
CHRISTIANA CENTER OPERATING COMPANY I LLC
DEFINITIONS OF TERMS
The following terms used in this Agreement shall have the meanings
described below:
"Acquisition and Construction Loan" shall mean the loan made or
committed to be made to the Company in respect of the Project at the time of
the acquisition of the Land, of which a portion of the proceeds in the amount
of $900,000 shall be used to fund the Land Acquisition Price and the
remainder of which shall provide financing for the construction of the
Project and related costs approved by the Members.
"Act" shall mean the Delaware Limited Liability Company Act, 6 Del.
C. Section 18-101 et. seq., as amended from time to time.
"Additional Capital Contributions" shall mean, with respect to a
Member, any additional contributions to the capital of the Company made
pursuant to Section 2.5 hereof.
"Additional Capital Date" shall mean the date on which the Members
make Additional Capital Contributions to the Company pursuant to and in
accordance with Section 2.5 hereof; provided that such date shall be the same
for both Members.
"Administrative Officer" shall be the Person designated as such
pursuant to Section 3.4 hereof to undertake the day to day operation of the
Company as provided in Section 3.4 hereof.
"Advisor" shall have the meaning set forth in Section 2.5.1 hereof.
"Affiliate" shall mean a Person who, with respect to any Member (a)
directly or indirectly controls, is controlled by or is under common control
with such Member; (b) owns or controls 10 percent (10%) or more of the
outstanding voting securities of such Member; or (c) is an officer, director,
manager, trustee, partner, or member of such Member.
"Agreed Value" with respect to a Member shall mean the aggregate
value of such Member's Initial Capital contributed to the Company as set
forth in Section 2.1 hereof but shall not include Additional Capital
Contributions.
"Agreement" means this operating agreement, as it may be amended,
restated or supplemented from time to time.
"Bankruptcy" means, with respect to a Member, the happening of any
of the following: (a) the making of a general assignment for the benefit of
creditors; (b) the filing of a voluntary petition in bankruptcy or the filing
of a pleading in any court of record admitting in writing an inability to pay
A-1
debts as they become due; (c) the entry of an order, judgment or decree by
any court of competent jurisdiction adjudicating such Member to be bankrupt
or insolvent; (d) the filing of a petition or answer seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation; (e) the
filing of an answer or other pleading admitting the material allegations of,
or consenting to, or defaulting in answering, a bankruptcy petition filed
against a Member in any bankruptcy proceeding; (f) the filing of an
application or other pleading or any action otherwise seeking, consenting to
or acquiescing in the appointment of a liquidating trustee, receiver or other
liquidator of all or any substantial part of a Member's properties; and (g)
the commencement of any proceeding seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under
any statute, law or regulation which has not been quashed or dismissed within
180 days.
"Buy-Sell Price" shall have the meaning set forth in Section 8.2.1
hereof.
"Capital Account" shall mean the accounting record of each Member's
capital interest in the Company maintained pursuant to and in accordance with
Section 2.6 hereof.
"Capital Contribution" shall mean, with respect to each Member, the
Agreed Value set forth in Section 2.1 hereof with respect to such Member
which has been credited to such Member's Capital Account pursuant to Section
2.4 hereof.
"Capital Notice" shall have the meaning set forth in Section 2.5.1
hereof.
"Certificate of Formation" shall mean the certificate of formation
of the Company, as amended or restated from time to time, filed in the Office
of the Secretary of State of the State of Delaware in accordance with the Act.
"Certificate of Cancellation" shall mean the certificate of
cancellation filed by the Liquidating Trustee under the Act at such time as
set forth in Section 12.6 hereof.
"Class A Member" shall have the meaning set forth in the first
paragraph of this Agreement.
"Class A Member Additional Capital" shall mean the Additional
Capital Contributions, if any, made by the Class A Member pursuant to Section
2.5 hereof. The Class A Member Additional Capital shall provide the basis
upon which the Class A Member Preferred Return on Additional Capital is
calculated.
"Class A Member Aggregate Preferred Return" shall mean the sum of
the Class A Member Preferred Return on Initial Capital and the Class A
Member Preferred Return on Additional Capital.
A-2
"Class A Member Initial Capital" shall mean the Capital Contribution
made by Class A Member pursuant to Section 2.2.2 and treated as Initial
Capital pursuant to Section 2.4 hereof, provided that to the extent there is
an advance or draw on the Letter of Credit delivered by the Class A Member
pursuant to Section 2.2.1 hereof, any such advance or draw, plus interest
thereon not paid or reimbursed by the Company, shall be treated as a Capital
Contribution and shall be part of the Class A Member Initial Capital as of
the date of such advance or draw. The Class A Member Initial Capital shall
provide the basis upon which the Class A Member Preferred Return on Initial
Capital shall be calculated.
"Class A Member Preferred Return on Additional Capital" shall mean
the Preferred Return on Additional Capital to which the Class A Member is
entitled under this Agreement.
"Class A Member Preferred Return on Initial Capital" shall mean the
cumulative right given to the Class A Member to receive in respect of each
Fiscal Year a sum equal to ten percent (10%) per annum (determined on the
basis of a year of 365 days, for the actual number of days occurring in the
period for which the Class A Member Preferred Return on Initial Capital is
being determined, cumulative to the extent not distributed in any quarter
pursuant to Section 10.1.1(a) or 10.2.1(a) hereof, but not compounded) of the
average daily balance of the Class A Member Unreturned Initial Capital from
time to time during the period to which the Class A Member Preferred Return
on Initial Capital relates. The Class A Member Preferred Return on Initial
Capital shall commence on the Initial Capital Date and shall be payable as
provided in this Agreement.
"Class A Member Unreturned Additional Capital" shall mean the Class
A Member Additional Capital reduced by cash distributions in respect of the
Class A Member Additional Capital under Section 10.2.3 hereof.
"Class A Member Unreturned Initial Capital" shall mean the Class A
Member Initial Capital reduced by cash distributions in respect of the Class
A Member Initial Capital made pursuant to Section 10.2.3.
"Class B Member" shall have the meaning set forth in the first
paragraph of this Agreement.
"Class B Member Additional Capital" shall mean the Additional
Capital Contributions, if any, made by the Class B Member under Section 2.5.
The Class B Member Additional Capital shall provide the basis upon which the
Class B Member Preferred Return on Additional Capital shall be calculated.
"Class B Member Initial Capital" shall mean the Capital Contribution
made by Class B Member pursuant to Section 2.3 hereof and treated as Initial
Capital pursuant to Section 2.4. The Class B Member Initial Capital shall
provide the basis upon which the Class B Member Subordinated Preferred Return
on Initial Capital shall be calculated.
"Class B Member Preferred Return on Additional Capital" shall mean
the Preferred Return on Additional Capital to which the Class B Member is
entitled under this Agreement.
A-3
"Class B Member Subordinated Preferred Return on Initial Capital"
shall mean the cumulative right given to the Class B Member to receive in
respect of each Fiscal Year a sum equal to ten percent (10%) per annum
(determined on the basis of a year of 365 days, for the actual number of days
occurring in the period for which the Class B Member Subordinated Preferred
Return on Initial Capital is being determined, cumulative to the extent not
distributed in any quarter pursuant to Section 10.1.2 or 10.2.2 hereof, but
not compounded) of the average daily balance of the Class B Member Unreturned
Initial Capital from time to time during the period to which the Class B
Member Subordinated Preferred Return on Initial Capital relates. The Class B
Member Subordinated Preferred Return on Initial Capital shall be calculated
commencing on the Initial Capital Date and shall be payable as provided in
this Agreement; provided that the Class B Member Subordinated Preferred
Return on Initial Capital is specifically subordinated to the Class A Member
Preferred Return on Initial Capital, the Class A Member Preferred Return on
Additional Capital and the Class B Member Preferred Return on Additional
Capital.
"Class B Member Unreturned Additional Capital" shall mean the Class
B Member Additional capital reduced by cash distributions in respect of the
Class B Member Additional Capital under Section 10.2.3 hereof.
"Class B Member Unreturned Initial Capital" shall mean the Class B
Member Initial Capital reduced by cash distributions in respect of the Class
B Member Initial Capital made pursuant to Sections 10.2.4 hereof.
"Code" shall mean the Internal Revenue Code of 1986 (or successor
thereto), as amended from time to time.
"Collateral Agreements" shall mean each of the documents, agreements
and instruments, including without limitation, the Construction Management
Agreement, the Leasing and Management Agreement, the Developer's Agreement
and the Land Acquisition Agreement, executed, delivered or performed or to be
executed, delivered or performed in connection with, or as a condition of,
the consummation of the transactions provided in or contemplated by this
Agreement.
"Company" means the limited liability company which is the subject
of this Agreement, as such limited liability company may from time to time be
constituted.
"Construction Management Agreement" shall mean that certain
agreement by and between the Company and InSite, Inc. for the provisions of
construction management services in connection with the Project.
"Contact Representative" shall have the meaning set forth in Section
3.3 hereof.
"CSC" shall have the meaning set forth in Section 5.2.5 hereof.
"CSC Lease" shall have the meaning set forth in Section 5.2.5 hereof.
"Defaulting Member" shall have the meaning set forth in Section
2.5.5 hereof.
A-4
"Depreciation" shall mean, for each Fiscal Year or other period, an
amount equal to the depreciation, amortization, or other cost recovery
deduction allowable for federal income tax purposes with respect to an asset
for such Fiscal Year or other period, except that if the Gross Asset Value of
an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization, or other cost recovery
deduction for such Fiscal Year or other period bears to such beginning
adjusted tax basis. In the event that the federal income tax depreciation,
amortization, or other cost recovery deduction is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method.
"Designated Representatives" shall have the meaning set forth in
Section 3.4 hereof.
"Developer's Agreement" shall mean that certain agreement by and
between the Company and Commonwealth Group, Ltd. for the provision of
development services in connection with the Project.
"Electing Member" shall have the meaning set forth in Section 8.2.1
hereof.
"Election Notice" shall have the meaning set forth in Section 8.2.1
hereof.
"Election Period" shall have the meaning set forth in Section 8.2.1
hereof.
"Fiscal Year" means the year on which the accounting and federal
income tax records of the Company are kept.
"Gross Asset Value" shall mean with respect to any asset of the
Company, the asset's adjusted basis for federal income tax purposes, except
that (i) where an asset has been revalued on the books of the Company the
Gross Asset Value shall be adjusted to reflect such revaluation, (ii) where
an asset has been contributed to the Company by a Member, the Gross Asset
Value shall be its fair market value as established by the Members and (iii)
the Gross Asset Value of Company assets shall be adjusted to reflect
Depreciation taken into account with respect to such assets for purposes of
determining Profits or Losses.
"Gross Value of the Project" shall have the meaning set forth in
Section 8.4 hereof.
"Indemnitee" shall have the meaning as set forth in Section 6.2
hereof.
"Indemnitee Member" shall have the meaning set forth in Section 6.3
hereof.
"Indemnitor Member" shall have the meaning as set forth in Section
6.3 hereof.
"Initial Capital" shall mean, where no distinction of the Members is
required, the initial Capital Contribution of such Member at the Agreed Value
upon which a preferred return with respect to such Member is calculated.
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"Initial Capital Date" shall mean with respect to the Class A Member
for purposes of calculating the Class A Member Preferred Return on Initial
Capital and with respect to the Class B Member for purposes of calculating
the Class B Member Subordinated Preferred Return on Initial Capital, the date
on which the Permanent Loan is funded; provided, however, that with respect
to the Class A Member, to the extent there is an advance or draw on the
Letter of Credit delivered by the Class A Member pursuant to Section 2.2.1
hereof, then the Initial Capital Date with respect to such advance and draw
shall be the date on which such advance or draw is made under the Letter of
Credit.
"Interest" shall mean with respect to a Member such Member's
interest in the rights, powers, privileges, duties and obligations as
specified in this Agreement.
"Land" shall mean the unimproved real property located in New Castle
County, Delaware, as more fully described in the Land Acquisition Agreement.
"Land Acquisition" shall mean the acquisition of the Land pursuant
to and in accordance with the Land Acquisition Agreement.
"Land Acquisition Agreement" shall mean the agreement dated even
date herewith executed between the Company, as purchaser, and the Class B
Member, as seller, for the acquisition of the Land.
"Land Acquisition Price" shall mean Nine Hundred Thousand Dollars
($900,000).
"Leasing and Management Agreement" shall mean that certain agreement
by and between the Company and Commonwealth Management Group, Ltd. pursuant
to which Commonwealth Management Group, Ltd shall provide property management
and leasing services in connection with the Project.
"Letter of Credit" shall mean the letter of credit provided by the
Class A Member pursuant to and in accordance with Section 2.2.1 hereof.
"Liquidating Trustee" shall have the meaning set forth in Section
12.3 hereof.
"Major Action" shall have the meaning set forth in Section 3.2
hereof.
"Members" shall have the meaning set forth in the first paragraph of
this Agreement and shall be used where no distinction between the Class A
Member and the Class B Member is required. The term "Members" shall include
any Person that is admitted to the Company as an additional or substitute
member, in accordance with the terms of the Agreement.
"Member Minimum Gain" shall mean an amount determined by computing
with respect to each Member Nonrecourse Debt, the Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a nonrecourse
liability, determined in accordance with Treasury Regulation Section
1.704-2(i)(3).
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"Member Nonrecourse Debt" shall mean nonrecourse indebtedness of
the Company with respect to which any Member has a direct or indirect risk of
loss, as more fully defined in Treasury Regulation Section 1.704-2(b)(4).
"Member Nonrecourse Deduction" shall mean, for each Fiscal Year, the
Company deductions which are attributable to Member Nonrecourse Debt and are
characterized as "partner nonrecourse deductions" under Treasury Regulation
Section 1.704-2(i)(l).
"Minimum Gain" shall mean and refer to, at any time, with respect to
all nonrecourse liabilities of the Company (within the meaning of Treasury
Regulation Section 1.704-2(b)(3)) the aggregate amount of gain (of whatever
character), if any, that would be realized by the Company if it disposed of
(in a taxable transaction) all Company Property subject to such liabilities
in full satisfaction thereof, and as further defined in Treasury Regulation
Section 1.704-2(d).
"Mutual Disagreement" shall have the meaning set forth in Section
8.1 hereof.
"Net Cash From Operations" shall mean the gross cash proceeds from
the ownership or operation of the Property (excluding Capital Contributions,
Additional Capital Contributions and proceeds from Capital Loans) less the
portion thereof used to pay or establish reserves for all Company expenses,
debt payments, capital improvements, replacements and contingencies, all as
determined by the Members. Net Cash From Operations shall not be reduced by
depreciation, amortization, cost recovery deductions or similar allowances,
but shall be increased by any reductions to reserves previously established.
"Net Cash from Sales or Refinancings" shall mean the net cash
proceeds from all sales or other dispositions of the Property (other than in
the ordinary course of business) and all proceeds realized by the Company
upon any refinancing of Company indebtedness, less (i) expenses incident to
such refinancing and satisfaction of any indebtedness being refinanced, and
(ii) any portion thereof used to establish reserves, all as determined by the
Members. "Net Cash from Sales or Refinancings" shall include all principal
and interest payments with respect to any note or other obligation received
by the Company in connection with any sales and other dispositions of the
Property.
"Net Equity Value of a Member's Interest" shall have the meaning set
forth in Section 8.4(b) hereof.
"Nonrecourse Deductions" shall have the meaning set forth in
Treasury Regulation Section 1.704-2(b)(1).
"Notified Member" shall have the meaning set forth in Section 2.5.1
hereof.
"Notifying Member" shall have the meaning set forth in
Section 2.5.1 hereof.
"Percentage Interest" shall mean with respect to a Member, such
Member's Interest expressed as a percentage in relation to the Interests held
by the other Members, as adjusted from time to time by the admission or
withdrawal of Members for any reason as provided in this Agreement or as
agreed to by the unanimous consent of the Members and reflected on a schedule
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attached hereto as Exhibit B. The initial Percentage Interest of each Member
shall be fifty percent (50%) as set forth on Exhibit B attached hereto.
"Performing Member" shall have the meaning set forth in Section
2.5.5 hereof.
"Permanent Loan" shall mean the loan to be obtained by the Company,
the proceeds of which, together with the Class A Member Initial Capital,
shall be applied to reduce or repay the Acquisition and Construction Loan.
"Permitted Transfer" shall have the meaning set forth in Section 7.2
hereof.
"Person" means an individual, firm, corporation, partnership,
limited liability company, association, estate, trust, pension or
profit-sharing plan, or any other entity.
"Preferred Return on Additional Capital" shall mean, with respect to
each of the Class A Member and the Class B Member, the cumulative right given
to each Member to receive in respect of each Fiscal Year a sum equal to ten
percent (10%) per annum (determined on the basis of a year of 365 days, for
the actual number of days occurring in the period for which the Preferred
Return on Additional Capital is being determined, cumulative to the extent
not distributed in any quarter to such Member pursuant to Sections 10.1.1(a)
or (b) and/or Sections 10.2.1(a) or (b), as the case may be, but not
compounded) of the average daily balance of such Member's Unreturned
Additional Capital from time to time during the period to which such
Preferred Return on Additional Capital relates. Each Member's Preferred
Return on Additional Capital shall commence on the Additional Capital Date
and shall be payable as provided in this Agreement.
"Preferred Return Percentage" shall mean, with respect to the Class
A Member, that percentage, the numerator of which is the Class A Member
Aggregate Preferred Return and the denominator of which is the sum of the
Class A Member Aggregate Preferred Return and the Class B Member Preferred
Return on Additional Capital, and shall mean, with respect to the Class B
Member, that percentage, the numerator of which is the Class B Member
Preferred Return on Additional Capital, and the denominator of which is the
sum of the Class A Member Aggregate Preferred Return and the Class B Member
Preferred Return on Additional Capital.
"Profits" and "Losses" shall mean, for each Fiscal Year or other
period, an amount equal to the Company's taxable income or loss for such year
or period, as computed for federal income tax purposes and determined in
accordance with Section 703(a) of the Code (for this purpose, all items of
income, gain, loss, or deduction required to be stated separately pursuant to
Section 703(a)(l) of the Code shall be included in taxable income or loss),
with the following adjustments:
(a) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or
Losses shall be added to such taxable income or loss;
(b) Any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as such expenditures pursuant to Treasury
Regulation Section 1.704-l(b)(2)(iv)(i), and
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not otherwise taken into account in computing Profits or Losses shall be
subtracted from such taxable income or loss;
(c) Gain or loss resulting from any disposition of Company
Property with respect to which gain or loss is recognized for federal income
tax purposes shall be computed by reference to the Gross Asset Value of the
Property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value.
(d) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing taxable income or loss,
Depreciation shall be taken into account for such Fiscal Year or other period
in computing taxable income or loss;
(e) Notwithstanding any other provision of this definition,
Nonrecourse, Deductions, Member Nonrecourse Deductions and any items of
income, gain, loss or deduction which are specially allocated pursuant to
Section 9.3 of this Agreement, shall not be taken into account in computing
taxable income or loss; and
(f) In any case where, in accordance with Treasury Regulation
Section 1.704-1(b)(2)(iv)(e) or (f) Company Property is revalued on the books
of the Company to reflect its fair market value, the amount of such
revaluation (to the extent not previously taken into account) shall be taken
into account as gain or loss from a taxable disposition of such Property for
purposes of computing taxable income or loss.
"Project" shall mean the three (3) story Class A mid-rise office
building containing 150,000 +/- net rentable square feet, and shall include
fixtures, machinery, equipment, and all other improvements hereafter
constructed on the Land, including site improvements and parking facilities
for 750 vehicles, and all equipment, fixtures, furnishings and other
personalty used in connection therewith.
"Property" shall mean the Land and the Project, collectively.
"Regulatory Allocations" shall have the meaning as set forth in
Section 9.4 hereof.
"Related Person" shall have the meaning set forth in Section 6.2
hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Tax Matters Member" means the "tax matters member" as defined in
Code section 6231(a)(7).
"Tax Matters Representative" shall have the meaning set forth in
Section 11.8 hereof.
"Transfer" means to sell, assign, transfer, give, donate, pledge,
deposit, alienate, bequeath, devise or otherwise dispose of or encumber all
or any portion of an Interest to any Person other than the Company.
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"Transferee" shall mean a Person to whom a Transfer is made.
"Transferor" shall mean a Member making a Transfer under this
Agreement.
"Treasury Regulations" or "Regulations" shall mean pronouncements,
as amended from time to time, or their successor pronouncements, which
clarify, interpret and apply the provisions of the Code, and which are
designated as "Treasury Regulations" by the United States Department of the
Treasury.
"Unreturned Additional Capital" shall mean the Class A Member
Unreturned Additional Capital and/or the Class B Member Unreturned Additional
Capital, as applicable.
"Unreturned Initial Capital" shall mean the Class A Member
Unreturned Initial Capital and/or the Class B Unreturned Initial Capital, as
applicable.
END OF EXHIBIT A
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EXHIBIT B
TO
OPERATING AGREEMENT OF
CHRISTIANA CENTER OPERATING COMPANY I LLC
PERCENTAGE INTERESTS
PERCENTAGE
MEMBER INTEREST
------ ----------
Class A Member 50%
Class B Member 50%
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EXHIBIT C
TO
OPERATING AGREEMENT OF
CHRISTIANA CENTER OPERATING COMPANY I LLC
COPY OF CSC LEASE
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SCHEDULE 3.5.1
Class B Member Reimbursable Fees
A-13
SCHEDULE 3.5.2
Class A Member Reimbursable Fees
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SCHEDULE 5.2.7
Brokerage or Leasing Fees on CSC Lease
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SCHEDULE 5.2.15
Construction Contracts
X-00
X-00